Bank of China Ltd, a Hong Kong-listed Chinese bank, has been slammed by mainland investors for launching an oil price futures product that led to them suffering huge losses after the sudden drop of United States crude oil prices.
The bank said in a statement on Wednesday evening that its main investors would settle trades for its crude oil futures trading product at -US$37.63 per barrel, which was based on the trading price quoted by the Chicago Mercantile Exchange (CME) on Monday, US time. It emphasized that the negative settlement price was not a systemic error.
Some individual investors claimed the Bank of China’s futures product, called Yuanyou Bao or literally “crude oil treasure,” contained some defects and unclear trading rules, while the bank failed to manage the potential risk. They complained that the bank did not follow its peers’ practice of completing the position transfer a week or 10 days before the last trading day of the front-month contracts, but only completed it just before the last trading day.
A screenshot of a receipt showing how a Chinese investor suffered a huge loss in Yuanyou Bao was widely circulated in China. The investor bought 20,000 crude oil futures contracts for 3.88 million yuan (US$540,000), or $27 per contract, but was forced to close positions at -US$37.63 per contract on Wednesday in China’s time zone. The investor lost all his 3.88 million yuan and owes the Bank of China another 5.32 million yuan.
The loss was recorded after the US WTI futures collapsed below US$0 a barrel on Monday for the first time because of oversupply in the markets caused by the coronavirus pandemic. Futures decreased to -US$37.63 a barrel.
The Bank of China suspended trading in its US crude oil contract products for a day on Tuesday. It said on Wednesday that the one-day trading suspension did not affect its clients’ rights.
A netizen said in a Weibo post on Wednesday that he was helping a group of victims to file a class action against the Bank of China.
Exchange-trade-fund
The China Securities Regulatory Commission recently suspended the application of exchange-trade-fund (ETF) products related to medical, semiconductors, 5G and new energy vehicle industries. It also suspended the application of ETFs for commodities such as crude oil due to their low liquidity.
The regulator launched a new liquidity requirement for new ETF products, Yicai.com reported, citing some mutual fund operators.
Supporting rural areas
China will ramp up financial and insurance assistance to sectors related to agriculture, rural areas and farmers, said the China Banking and Insurance Regulatory Commission.
To secure the supply of major farm produce, the commission encouraged commercial banks to strengthen financial support for grain production, circulation, processing, storage, import and export and consumption, and offer good financial services to the animal husbandry industry.
Further financial assistance should be offered to family farms, rural cooperatives and people returning or moving to the countryside to set up businesses, said the circular.
Steel demand
China is expected to see its weakened demand for steel forge a strong recovery in the second quarter this year as the country’s infrastructure investment and production resumption gains more momentum.
He Wenbo, an official of the China Iron and Steel Association (CISA), said the quarter-on-quarter growth would be remarkable, citing favorable demand-side plans, including the renovation projects of old urban residential areas and enhanced investment into “new infrastructure.”
China will intensify the renovation of old urban residential areas in 2020, with 39,000 communities to be renovated, benefiting about 7 million households.
Tianjin free trade zone
The total number of new registrations in the Tianjin Pilot Free Trade Zone exceeded 64,000 with a total registered capital of 2.17 trillion yuan at the end of 2019.
Last year, the Tianjin Pilot Free Trade Zone contributed about 10% of gross domestic product, 25% of foreign direct investment, 60% of the city’s outbound direct investment and one-third of foreign trade in Tianjin. It only consumed 1% of the city’s land resources.
The free trade zone plans to form an export base comprising Beijing, Tianjin and Hebei province, echoing the Belt and Road initiative.
Company news
Huawei Technologies, a Shenzhen-based company, said on Wednesday it had donated 172,000 medical masks and an integrated system of video-conferencing equipment and programs to Morocco to help the North African country combat the Covid-19 epidemic.
A total of 168 new infections were confirmed in Morocco on Wednesday, bringing the total number to 3,377 in the country, according to the Moroccan Ministry of Health.
China Unicom, one of three Chinese telecommunications operators, reported a 13.9% year-on-year drop in net profit to 3.17 billion yuan in the first quarter of 2020. Revenue rose 0.9% to 73.8 billion yuan.
The company said it had used big data, artificial intelligence and 5G technologies to help contain the Covid-19 virus over the past few months.
The story was written by Xu Jiangshan and Yuan Tianyi and first published at ATimesCN.com. It was translated into English by Nadeem Xu.